China looms over Tai­wan’s econ­omy

As the is­land strug­gles to re­vi­tal­ize, some want to tap into cross-strait mar­kets. Oth­ers are dis­trust­ful.

Los Angeles Times - - THE WORLD - By Alice Su

KAOHSIUNG, Tai­wan — For three decades, Liu Hong-cheng’s fam­ily has ped­dled ap­ples, or­anges and cher­ries at a morn­ing mar­ket in Kaohsiung, Tai­wan’s sec­ond-largest city. Dur­ing that time, the Lius con­sis­tently voted for the party of Pres­i­dent Tsai Ing-wen, who has re­sisted Chi­nese pres­sure to bring the is­land un­der Hong Kong-style uni­fi­ca­tion.

In Novem­ber, fruit seller Liu, in search of an eco­nomic jack­pot, changed sides. He voted for the win­ning can­di­date in the city’s may­oral election, Han Kuo-yu, a mem­ber of the op­po­si­tion Kuom­intang, which em­braces di­a­logue with Bei­jing. Han’s slo­gan: “Sell things out, bring peo­ple in, make Kaohsiung su­per rich.”

“It’s not about get­ting close to China,” Liu, 50, ex­plained of his change in think­ing. “It’s about get­ting close to cash.”

For decades, Tai­wan’s econ­omy has been be­set by stag­nant wages, low growth and a lack of con­sumer or for­eign in­vestor con­fi­dence. Tsai’s Demo­cratic Pro­gres­sive Party suf­fered ma­jor losses in Novem­ber’s midterm elec­tions amid the eco­nomic woes, com­pounded by Tsai’s un­pop­u­lar pen­sion and la­bor law re­forms.

Some Tai­wanese be­lieve that Tai­wan can re­vi­tal­ize its econ­omy by tap­ping into China’s mar­kets. Han’s viral cam­paign for mayor played on pop­u­lar frus­tra­tion with Kaohsiung’s stag­na­tion. He branded him­self as a “bald­headed veg­etable seller” who would sell Tai­wanese fish and veg­eta­bles to the Chi­nese mar­ket, in­spir­ing rap videos with re­frains of “let’s get that money” and draw­ing tens of thou­sands of sup­port­ers to ral­lies.

Oth­ers say that Chi­nese busi­ness can’t be trusted. One of Tai­wan’s big­gest civil protests, the Sun­flower Move­ment of 2014, drew more than 100,000 pro­test­ers into the streets against a trade pact that would open Tai­wan and China’s ser­vice sec­tors to one an­other. Since Tsai took of­fice in 2016, Tai­wan’s gov­ern­ment has pushed policies of in­dus­trial in­no­va­tion and turn­ing to South and South­east Asian mar­kets, in hopes of re­duc­ing re­liance on China.

Ei­ther way, China looms large in any ef­fort to re­vi­tal­ize Tai­wan’s econ­omy: Move too far from China, and the eco­nomic gi­ant could cut Tai­wan out of sup­ply chains and re­gional trade agree­ments, not to men­tion the sec­ond-big­gest mar­ket in the world. Grow too de­pen­dent, and Tai­wan’s po­lit­i­cal fu­ture could end up in China’s hands.

Kaohsiung, once one of the world’s top 10 ship­ping ports, has tried but failed to re­brand it­self as a tourist hub. On a hazy win­ter morn­ing, only a hand­ful of tourists took self­ies at the in­dus­trial har­bor, pos­ing against a sky­line of cargo ships and oil rigs. Rusted signs hung over store­fronts down­town, metal screens pulled shut over many of the front doors.

Kaohsiung has in­vested in a world-class per­form­ing arts cen­ter, a river with ro­man­tic boat cruises and a metro sta­tion with a sev­en­minute flu­o­res­cent light show. But none of these ef­forts has had a ma­jor im­pact.

Man­u­fac­tur­ing and ship­ping once brought jobs and wealth to Kaohsiung, es­pe­cially as Tai­wan tran­si­tioned from agri­cul­ture to in­dus­try and do­mes­tic to for­eign ex­port mar­kets. But in the 1990s, China be­gan to open up, just as Tai­wan’s la­bor costs were ris­ing. Tai­wanese fac­to­ries moved en masse to China, bring­ing ex­per­tise and much-needed in­vest­ment while many for­eign in­vestors shied away in re­sponse to the jar­ring Tianan­men Square mas­sacre of pro-democ­racy pro­test­ers.

Thirty years later, China is shift­ing to a con­sump­tion­based econ­omy. La­bor costs are ris­ing, so much that many fac­tory own­ers are mov­ing to nearby na­tions of South­east Asia. In heavy in­dus­try-cen­tered Kaohsiung, busi­nesses never caught on to Tai­wan’s other strong suit, in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy.

Young adults leave cities like Kaohsiung in droves to seek jobs in the cap­i­tal, Taipei, or over­seas, in China or else­where. One-tenth of work­ing-age Tai­wanese now live in China, ac­cord­ing to the Econ­o­mist, many be­cause the salaries there are much higher.

“Young peo­ple are get­ting more prac­ti­cal. It’s not about iden­tity, but about mak­ing use of Chi­nese re­sources,” said Zhang Tengchi, pro­fes­sor of po­lit­i­cal science at Na­tional Tai­wan Univer­sity. “They’re bal­anc­ing their be­lief sys­tem ver­sus their prac­ti­cal needs.”

For some small-busi­ness own­ers, Chi­nese en­gage­ment is wel­come as long as it means more busi­ness. Lin Zheng-xiong, a 55-year-old fruit seller, said he’d been sell­ing bushels of 70 to 80 guavas to ho­tels back when Chi­nese tourists came to Kaohsiung. Now he is sell­ing only a few pieces of fruit at a time.

“We just hope for the econ­omy to get bet­ter,” Lin said, adding that he didn’t think that China’s uni­fi­ca­tion rhetoric was any­thing more than talk. “If they wanted to fight us, they would have at­tacked us a long time ago.”

Oth­ers, though, worry that China’s busi­ness is a trap. Shih Te-lung, chair of a Kaohsiung la­bor union, said the de­crease in Chi­nese tourists in re­sponse to Tsai’s policies showed that Chi­nese busi­ness is dan­ger­ously po­lit­i­cal.

“When tourists dis­ap­peared, this let a lot of peo­ple know that de­pen­dence is a prob­lem,” Shih said. “We want a good econ­omy, but we don’t want to be con­trolled.”

Economists say Tai­wan’s prob­lems can’t be solved by tourism, agri­cul­ture or short-term in­ter­est in a politi­cian. Tai­wan, they say, needs a struc­tural shift away from its tra­di­tional place on the lower end of man­u­fac­tur­ing sup­ply chains. More than 40% of Tai­wanese ex­ports and more than 70% of its out­bound in­vest­ments go through China. But 79% of those ex­ports are low-val­ueadded mid­stream com­po­nents, such as parts for shoes, clothes, and elec­tron­ics. Those prod­ucts are then put to­gether in China be­fore they’re ex­ported, with low re­turns for the Tai­wanese man­u­fac­tur­ers.

“We are al­ways mak­ing things for other peo­ple, but we don’t have our own brands,” said Liu Da-nien, di­rec­tor of the Re­gional De­vel­op­ment Study Cen­ter at the Chung Hua In­sti­tu­tion for Eco­nomic Re­search.

A few Tai­wanese brands have com­peted well on the global stage, in­clud­ing HTC cell­phones, ASUS com­put­ers, Gi­ant bi­cy­cles and 85 De­grees C, a bak­ery-cafe with sev­eral branches in Los An­ge­les. But they are the ex­cep­tion, and Tai­wan’s tech com­pa­nies have fallen far be­hind re­gional gi­ants in­clud­ing Sam­sung in South Korea and Huawei in China.

“Let pol­i­tics stay in Taipei and the econ­omy stay in Kaohsiung,” read an­other of Han’s slo­gans. But any­thing that crosses the Tai­wan Strait is in­her­ently po­lit­i­cal, busi­ness in­cluded.

“No one wants to fully rely on China,” said Wang Chun-chieh, pro­fes­sor of po­lit­i­cal econ­omy at Na­tional Sun Yat-sen Univer­sity in Kaohsiung. “China doesn’t use mar­ket mech­a­nisms. To­day, if cross-strait re­la­tions are good, they send tourists. If not, they don’t. China can stran­gle you po­lit­i­cally.”

The U.S.-China trade war has in­creased pres­sure on Tai­wan, es­pe­cially with grow­ing global dis­trust of Chi­nese tech­nol­ogy, the field in which Tai­wanese com­pa­nies are most in­te­grated into China’s sup­ply chain. Tai­wan’s gov­ern­ment has for­bid­den gov­ern­ment agen­cies and state-con­trolled com­pa­nies from us­ing Huawei prod­ucts or even hav­ing WeChat on their cell­phones, cit­ing cy­ber­se­cu­rity con­cerns.

Pri­vate busi­nesses are still free to deal with Chi­nese tech, but may soon have to choose sides be­tween a Chi­nese or an Amer­i­can sup­ply chain.

“Tai­wan is al­ready a democ­racy and the busi­ness­men here in Tai­wan have their own busi­ness in­stinct. If they feel that China is still a good mar­ket, they will con­tinue to go,” said Joseph Wu, Tai­wan’s min­is­ter of for­eign af­fairs. But Tai­wan’s gov­ern­ment wants to pro­vide busi­ness al­ter­na­tives wher­ever pos­si­ble, he said, with an em­pha­sis on the United States.

Some worry, though, that Tai­wan’s po­lit­i­cal fu­ture may wind up as a bar­gain­ing chip in the trade war.

“[Pres­i­dent] Trump is a very trans­ac­tional per­son. If he sees a deal to be made, I think he will quickly cave in and do things that jeop­ar­dize our good will.” said Ja­son Hsu, a Kuom­intang leg­is­la­tor.

After a speech by Chi­nese Pres­i­dent Xi Jin­ping last month on cross-strait uni­fi­ca­tion, Kaohsiung’s new lead­ers have been chang­ing their tone.

“We won’t just de­pend on China’s mar­ket. China is not the fo­cus,” said Pan Henghsu, di­rec­tor of Kaohsiung’s tourism bureau.

Even fruit seller Liu re­mains con­cerned about China as an ex­is­ten­tial threat.

“They can just make you dis­ap­pear if they want,” he said. “Tai­wanese peo­ple don’t ac­cept that.”

Yet over time, Liu added, Tai­wan’s eco­nomic in­ter­ests could even­tu­ally lead to vol­un­tary uni­fi­ca­tion. “If the po­lit­i­cal sit­u­a­tion gets bet­ter,” he said, “I think we’ll end up jump­ing over there on our own.”

Pho­to­graphs by An Rong Xu For The Times

KAOHSIUNG was once one of the world’s top 10 ship­ping ports, but fac­to­ries moved en masse to China.

TOURISTS pose in front of Kaohsiung port’s in­dus­trial sky­line. Tai­wan’s sec­ond largest city has sought to rein­vent it­self as a tourist des­ti­na­tion, with lit­tle luck.

THE PORT CITY re­cently elected a mayor who hails the eco­nomic up­side of di­a­logue with Bei­jing.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.